Capital Brief | Trump Vs. Clinton: A Tale Of Convention Contrast

Editor's Note:Below is a brief excerpt from Hedgeye Potomac Chief Political Strategist JT Taylor's Capital Brief sent to institutional clients each morning. For more information on how you can access our institutional research please emailsales@hedgeye.com.

"If your actions inspire others to dream more, learn more, do more and become more, you are a leader."

-John Quincy Adams

CLINTON’S CONVENTION CONTRAST

Hillary Clinton took center stage last night and made a case to her fellow Democrats and the country why they should coalesce around and support her this November. In a three-day build up to last night, speakers cast Clinton as experienced, stable and committed in stark contrast to Donald Trump - but all lot of this boils down to whether voters can connect to her on a personal level. Chelsea Clinton’s introduction provided the perfect touch portraying her mother as a role model and grandmother to all and amplifying her father’s message earlier in the week.

Clinton’s speech did what Donald Trump’s did not do – she addressed how she’ll provide strong and stable leadership and bring about economic change while at the same time conveying passion and dedication to the causes of millions of Americans. Clinton’s main objective was to neutralize her lingering negatives and appeal to Americans as an experienced hand and unifier by showcasing her career and persistent drive through decades of public service.

We see a requisite bump in the polls after a solid four days in Philly, but will she continue to excite her constituencies and sustain the momentum?

DEPENDING ON INDEPENDENTS

Uncommitted voters disenchanted with the two-party system continue to hold out on and with both conventions now complete, we wonder if either party has created enough enthusiasm for the ever-growing number of Independents to swing their way. Democrat-turned-Republican-turned-Independent Michael Bloomberg made the case against Trump for pro-business Independents who are wary of Clinton, but only time will tell if his endorsement is strong enough to shift voters her way.

Bernie Sanders’s supporters hold the golden ticket, but with the curtain now closed on the convention, it comes down to the strength and passion of the party’s message and grassroots efforts.

RUSSIAN ROULETTE

Trump rattled off some of the more myopic statements on Russia since former AK Governor Sarah Palin reminded us that Russia can be seen from her house...Criticism from all corners is building for his outrageous remarks encouraging Russia to continue their hacking efforts to find Clinton’s missing emails. Whether it was sarcasm or not, it crystallized where Trump’s head is. Rather than focusing on party themes and policy differences, like the ones he will see in debates, he sticks to the personal attacks that helped him thrive in the primaries.

We heard promises that the Republican convention would be a turning point for Trump, after which he would buckle down and get serious, but instead he continues to fall back on ridicule, innuendo and attention-getting headlines. While most of the country finally realizes that this is a change election - his rhetoric will only get him so far until he digs deeper on substance and focuses on solutions mattering most to the American people.

Reality Check: The Nonsense Of Helicopter Money Speculation

"There is considerable uncertainty over the outlook for prices," Kuroda told a press conference on Friday, following the Bank of Japan's July meeting. "In order to prevent these uncertainties from leading to a deterioration in confidence in households and businesses, we have decided to implement new measures."

The BOJ decided to double its annual purchases of ETFs to ¥6 trillion and will conduct an assessment of the effects of negative interest rates and its asset-buying program, which Reuters says suggests "that a major overhaul of its stimulus program may be forthcoming."

It's been a wild week leading up to the BOJ decision. "Helicopter money" speculation created a massive amount of volatility. Take a look at the last four days of trading in the USDJPY, with short-term intraday moves bouncing between -1.79% to +2.32%. Meanwhile, the peak-to-trough decline over the past four days is -3.55%:

In the past, BOJ Governor Haruhiko Kuroda has thrown cold water on helicopter money speculation. Here are a collection of recent statements from Kuroda addressing helicopter money:

"WSJ: There’s been a lot of discussion recently, especially among academics, about employing helicopter money, fiscal expansion financed with monetary quantitative easing. Is that something that should be considered in Japan?

Mr. Kuroda: No.

WSJ: Why not?

Mr. Kuroda: No, we have no intention to employ helicopter money, anything like that, because, as you know, in any—almost all developed countries, fiscal policy is formulated by the government and approved by the parliament. Fiscal policy is the responsibility of the government and the parliament and prerogative of the government and the parliament." 4/18/16 (Wall Street Journal)

"Helicopter money is a policy where monetary and fiscal measures become one. But developed countries have learned through history to keep monetary policy and fiscal policy separate, with the central bank taking charge of the former and the government the latter... I don't think [helicopter money] can be adopted under the current legal system." 4/28/16 (Nikkei Asian Review)

"No need and no possibility for helicopter money." mid-June, (BBC Radio 4)

"There is an institutionally established system in which the government and the Diet are responsible for carrying out fiscal policy, while monetary policy is conducted by an independent central bank. Under the current legal system, I don’t think we can carry out (helicopter money)." 6/17/16 (Japan News)

Why does this matter?

You'll note that the Reuters headline above is exactly one week before the BOJ announced it would pursue negative interest rates. You may be wondering... Will Kuroda shock markets again?

However, the more relevant question investors should be asking themselves is: Will the BOJ's "major [policy] overhaul," helicopter money or not, ultimately matter?

Since announcing the BOJ's negative interest rate policy in January:

Nikkei: -5.4%

USDJPY: -15.3%

10yr JGB: -29bps

Clearly, markets continue to price in Japanese #GrowthSlowing regardless of what BOJ bureaucrats say. We continue to believe that central planners cannot rain money down from the heavens and expect their flagging economies to grow.

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CHART OF THE DAY: Can Trump Win?

Editor's Note: Below is a brief excerpt and chart from today's Early Look written by Hedgeye Director of Research Daryl Jones. Click here to learn more.

"... Despite the punditry and career politicians missing the rise of Trump, the vast majority of voters are unhappy, so it shouldn’t have been terribly surprising. According to a recent poll from Rasmussen, 70% of likely voters believe the country is on the wrong track and a mere 24% believe the country is going in the right direction. The spread is near the highest level of the last 8 years.

So, despite his flaws, errant tweets, and narcissistic moments, it’s not difficult to see why a candidate that has never held political office is doing so well. The people are frustrated. Very frustrated. But can Trump win?"

CLICK TO ENLARGE

Oil Bulls Are Getting Pummeled as Long-Term Bears Get Paid

Takeaway:Oil bulls are getting pummeled while the long-term bears continue to get paid.

Double #Ouchy here - don’t look now but this morning’s drop towards the $40-handle for WTI puts it down -15% in the last month alone; was it the Dollar? Supply? Demand? A bird or a plane? With Durable Goods and Capex careening to the downside, the bullish narrative on “Global Cyclical Demand has bottomed” is very hard to follow.

Editor's Note: The snippet above is from a note Hedgeye CEO Keith McCullough wrote for subscribers this morning.Click hereto learn more.

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